La 265 - Homework 01

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What is the difference between validity and enforceability? Contract is a type of juristic acts. It is an agreement made between two or more persons which is in tended to be enforceable at law. It is constituted by consensus ad idem, the meeting of the minds, which can be said the acceptance and the offer coincide and must be made voluntarily. When the contract is formed, the contractual parties have the obligation between each other. However, not all of contracts can be enforced, only valid contract can. There seem to be confusion over the validity of contract and the enforceability of contract. Many people think they are the same but they are not. They have different meaning and affect to the contract. Hence to contrast them, we must understand what they are. Valid contract is a legal contract which has a binding effect upon contractual parties. Because of the validity, these parties have a legal relationship under contract for the purpose to satisfy their obligations. The valid contract must be executed without any vitiating factors. These vitiating factors affect the validity of contract by making them become void or voidable. A void contract is one which from the beginning has no legal effect. The contract becomes invalid from the beginning and confers no rights and imposes no obligations on either party. Any interested person can allege the nullity of this contract at any time. Whilst a voidable contract is one which may be either affirmed or repudiated at the option of one of the parties but not of the other. The contract is valid unless and until the party entitled to avoid a voidable contract does so treat it as a void. If he avoids this contract, it is deemed to have been void from the beginning. But if he ratifies this contract, it is deemed to have been valid from the beginning. According to their affect to the contract, the vitiating factors are easier to separate them into void factors group and voidable factors group. Void factors group are The object: If the object of the juristic acts which is expressly prohibited by law or is impossible or is contrary to public order or good morals, any juristic act which made under this kind of object is void under section 150 of the civil and commercial code. For example, an agreement to provide a prostitute with goods for use in her trade (Pearce v. Brooks (1866) LR 1 Ex 213). The object of this contract is contrary to good morals, thus this contract is void. The form: Section 152 of the civil and commercial code provides “An act which is not in the form prescribed by law is void” therefore any type contract which is prescribed to be in the form by law such as a Sale of Immovable Property or a Hire-Purchase must be made in correct form. Fictitious intention: A declaration of fictitious intention which made with the connivance of the other party is void under section 154 of the civil and commercial code. Therefore, if any party enters into a juristic act in spite of his mind does not intend to be bound by his expressed intention and the other party know his hidden intention, this act is void. Mistake as to an essential element: A declaration of intention which made under a mistake as to an essential element of the juristic act, a character, a person to be

2 a partner and a property being an object of the juristic act, is void under section 156 of the civil and commercial code. Therefore, if any party agrees to enter into a juristic act because he mistakes an essential element of the juristic act, this act is void. Nevertheless, if this mistake was due to the gross negligence of person making such declaration, he cannot avail himself of such invalidity under section 158. Voidable factors group are The capacity: The incapacitated person can be divided into four groups, a minor, an unsound mind person, a quasi-incompetent person and an incompetent person. The incapacitated person is deprived of capacity to enter into transactions. How much capacity is deprived depends on what group that the incapacitated person is in. - If he is an incompetent person, all of his capacity is deprived under section 29 of the civil and commercial code. Thereby any juristic act done by a person adjudged incompetent is voidable. - If he is an unsound mind person, all of his capacity is deprived only when he enters into a juristic act whilst he was actually unsound mind and the other party had knowledge of such unsound mind under section 30 of the civil and commercial code. Thereby any juristic act done by an unsound person but not adjudged incompetent is voidable only when it was done at that time. - If he is a quasi-incompetent person, some of his capacity is deprived. He cannot enter into some juristic acts like investing his property or contracting a loan or lending money by his own under section 34 of the civil and commercial code. He must obtain the consent of his curator for doing those transactions which are provided in section 34. Thereby he retains the capacity to enter into any juristic act which is not contrary to the provisions of section 34. If he enters into those prohibitive juristic acts without his curator’s consent, the contract is voidable. - If he is a minor, some of his capacity is deprived. Section 21 of the civil and commercial code provides “For the doing of a juristic act, a minor must obtain the consent of his legal representative. All acts done by him without such consent are voidable unless otherwise provided.” Thereby all juristic acts done by a minor is voidable accept he has got his legal representative’s consent or those are the limited category juristic acts under section 22-27 which grant him a permission to execute them. Mistake as to a quality: A declaration of intention which made under a mistake as to a quality of the person or property under section 157 of the civil and commercial code. Therefore, if any party agrees to enter into a juristic act because he mistakes a quality of the person or property of the contract, this act is voidable. Nevertheless, if this mistake was due to the gross negligence of person making such declaration, he cannot avail himself of such invalidity under section 158. Fraud: A declaration of intention procured by fraud is voidable only when the juristic act would not have been made without it under section 159 of the civil and commercial code. Fraud is a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his detriment. Therefore, if any party agrees to enter into the juristic act because of the mere misrepresentation of the truth that was shown by the other party in order to deceive him, this act is voidable. Nevertheless, the party entitled to avoid a voidable juristic act can only claim

3 compensation for damage resulting from such fraud if the fraud is only incidental that merely induced him to accept more onerous terms than he world otherwise have done under section 161. Besides, if both parties acted with fraud, neither of them can allege it to avoid the act or to claim compensation under section 163. Duress: A declaration of intention which express under duress is voidable only when the juristic act would not been made without the duress and it must be imminent and severe enough to make him fear under section 164 of the civil and commercial code. Duress is a wrongful threat made to compel a person to do something without his real volition. Therefore, if any party agrees to enter into a juristic act under the other party’s duress, this act is voidable. Upon the formation of contract, the contract will be valid if it has been formed without these vitiating factors. The validity of contract effects the obligations and properties of the contractual parties. The effect to the obligations is to create, modify or transfer claim. The effect to the properties is to create, modify or transfer ownership immediately. However, not all of valid contract can enforce. Enforceable contract is a contract which is valid and the court will enforce. It is accepted by the law and creates the right of action. The enforceability of contract ensures the contractual parties that the legal framework in which the performance of those rights and obligations is placed will promote certainty and predictable results. If the contract is unenforceable, any party cannot demand the other party to perform the contractual obligations. Another vital effect of enforceable contract is the ability to action. It can be seen clearly when there is a breach of contract, if the contract is unenforceable, the innocent party cannot enter an action in court but if it is enforceable, the innocent party can. Although the contract which lack enforceability is inactionable, the enforceability is not effect to the existence or the validity of contract. The contractual parties have been keeping on binding. They still have the moral obligations to perform under the contract. For graphical example, A and B enter into an unenforceable contract; If B already performed his obligations but A denies to perform contractual obligations, B cannot demand to be returned anything that he already paid because the moral obligations remain under the contract. Almost valid contracts are enforceable but some valid contracts need the additional factors to be able to enforce. These additional factors are Period of prescription: Period of prescription is the effect of the lapse of time in creation and destroying rights. The period of prescription cannot be extended or reduced by contractual parties on the reason that it is deemed as the provisions concerning to public order or good morals. The period of prescription is not directly affecting the enforceability of contract. Merely rights would be affected. The lapse of the period of prescription provides debtor the right to refuse the performance because the creditor’s claim is barred by prescription. Without claims, the contract becomes unenforceable indirectly. However, if the debtor does not refer to his right, the lapse of the period of prescription has no effect. Written evidence: Written evidence is any intentional recording of words in a visual form, whether in the form of handwriting, printing, typewriting or any other tangible form which can be used as evidence. There are no rules as to what form

4 written evidence should take. However, it must contain all substances that require by law. The written evidence affects the enforceability of contract only when the provisions impose like section 653 of the civil and commercial code which provides “A loan of money for a sum exceeding two thousand baht in capital is not enforceable by action unless there be some written evidence of the loan signed by the borrower.” Therefore, the contract that is not evidenced by writing where the law requires written evidence is not enforced by action. For example, A (lender) and B (borrower) made an oral loan agreement which exceed 2,000 baht; if A refuses to pay the money back to B, B cannot sue A because B does not have any written evidence under section 653 Consideration: The principle of consideration is only used in common law. Consideration is something in value bargained for and received by a promisor form a promisee that which motivates a person to do something. The consideration takes any of the following form, an act, a forbearance, a promise to do an act or a promise to forbear from something. According to this principle, all contracts can be enforced only when the promisee has given the consideration to the promisor. Past consideration, any consideration that was offered before the formation of contract, is not good consideration because the consideration can be offered latest at the time of the contract is formed. No consideration could be too small in a legal sense hence the consideration on the part of each party is not necessary to be equal to that received from the other. From the precedent context, it can conclude validity differs from enforceability in that 1. All of valid contracts are not enforceable but all of enforceable contracts are valid. 2. Validity affects the legal relationship between the contractual parties and also binds them with the contractual obligations but enforceability does not. 3. Enforceability affects the right to action and also ensures the contractual parties that the performance will certainly promote but validity does not.

Miss Sukumal Somboon 4801682008